“It kind of changes everything,” said Christopher Rolland, an analyst with Susquehanna Financial Group. “We have called it the canary in the CFIUS coal mine for a while now.”

The exact effects are still unclear, though, as evidenced by a careening price for Lattice stock in late trading Wednesday. Shares initially fell 1.6%, then bounced back to a gain, while competitor Xilinx Corp. /quotes/zigman/80149/compositeXLNX+0.10%
also moved higher in after-hours action. Shares are still far lower than the price Canyon Bridge, a private-equity firm with funding connected to the Chinese government, had agreed to pay in November 2016: $8.70 a share, or $1.3 billion.

In the many months since Lattice agreed to the deal, a pending review by the Committee on Foreign Investment in the U.S., or CFIUS, expired three times. Last Friday, Lattice asked that Trump review the deal after realizing that CFIUS was not going to recommend the acquisition to proceed.

The news is somewhat of a double-edged sword. It can be seen as good for national security, keeping U.S. semiconductor companies and their important technology out of the hands of the Chinese military or potential counterfeiters. But for investors who have been hoping that other independent semiconductor companies will be purchased for a hefty premium, those dreams may have vanished.

“We think it effects potential decisions or pending decisions around other deals in the sector as well,” Rolland said. “I think this raises the bar substantially for any other Chinese transactions of U.S. semiconductor companies.”

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The number of semi deals has dropped sharply from frenzied record levels in 2015, and Rolland believes that the unknowns surrounding the Lattice deal was one big reason.

“Twenty-five percent all U.S. based [semiconductor] companies were taken out in 2015, 20% in 2016, and that has slowed down substantially this year,” Rolland said. “We think that is on the back of this CFIUS murkiness around Lattice.”

In addition, The Wall Street Journal noted earlier this week
, China’s current buying spree of all stripes is hitting roadblocks abroad. Regulatory pressures are mounting in Europe and Japan as well, and China is reigning in some deal makers on concerns about capital leaving the country and rising debt.

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Lattice did have at least one other suitor last year, a fact that bled into the most gripping chip drama of the year, the proxy fight that ousted Chief Executive T.J. Rodgers waged with the chip maker he founded, Cypress Semiconductor Corp. /quotes/zigman/70818/compositeCY+0.78%
Portland, Oregon-based Lattice could potentially strike up conversations with Cypress again, since it was revealed in court filings during the proxy fight that Cypress did look at buying the company, or seek new buyers.

Lattice is unlikely to get the premium price that Canyon Bridge was willing to pay, though.

That devaluation shows the premium chip companies had a chance of receiving from Chinese buyers, which may be gone for all of them now. Lattice had said that it planned to double its jobs in the U.S. with cash from the acquisition, and investors may just move away from the chip industry if they believe the merger frenzy of previous years will never return. Less investment in chip companies could mean less investment by chip companies overall.

The possible removal of a group of buyers from the chip industry may not be such a bad thing, however. Too much M&A in the semiconductor business had always raised the risk of hurting innovation, as companies focus on buying growth and innovation gets the short shrift in a company focused on selling itself or involved in a massive merger.

In officially calling off the deal, Lattice said in a statement Wednesday evening that its future remains bright. It will be fascinating to see if that is the case, because Lattice’s future could be indicative of the future of the chip industry as a whole now that it appears the potential for Chinese cash infusions has been officially cut off by President Trump.

The PHLX Semiconductor Index /quotes/zigman/1468249/delayedSOX-0.05%
has rallied 24.7% year to date through morning trade Thursday, while the S&P 500 index /quotes/zigman/3870025/realtimeSPX+0.0072%
has gained 11.5%.

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